IPTV providers drop the training wheels

Phone companies at TelcoTV vow to step up the competition in 2008

In just a few short years, IPTV has collected 8.3 million subscribers worldwide – more than 5 million of them in just the last 12 months. There are scores of smaller telephone companies with active video programs, and many large telcos outside the U.S. rolling out IP video.

AT&T has contributed modestly to the worldwide subscriber tally thus far, but it is the IPTV behemoth in the U.S., and it’s preparing a rapid expansion in 2008 (Verizon FiOS, based on an FTTP architecture, is arguably not IPTV).

More than 180 exhibitors showed their
wares at the sixth-edition of the
TelcoTV Conference & Expo in Atlanta.

The modest size of the most recent TelcoTV Conference & Expo – the sixth – belies the rapidity with which IPTV is becoming a prominent market force, despite shortcomings common to new markets, notably that standards efforts have yet to keep pace with market development.

As shows go, TelcoTV is still a mere seedling when compared to the International Consumer Electronics Show in Las Vegas, or even the SCTE Cable-Tec Expo. This year the show may have seemed diminished, but that may have been a consequence of being held in Building C of the cavernous Georgia World Congress Center in Atlanta. Attendance has in fact grown; there were 3,089 show attendees, up from about 2,800 last year, and more than 180 exhibitors.

A participant on one TelcoTV panel discussion conceded it’s still “early days” for IPTV.

The session “IPTV CEO Roundtable” at TelcoTV looked at deployment issues from the viewpoint of a smaller telco provider. Brad Evans, CEO and chairman of Cavalier Telephone and TV, cited franchise agreements and negotiating for programming as two areas that caused slowdowns for the company’s video deployment, but “the biggest disappointment was getting the chip and set-top boxes to the point where they would do what we wanted them to do.”

Cavalier is a competitive local exchange carrier (CLEC) operating in 15 states including the District of Columbia. It lays claim to being the first telephone company to deploy MPEG-4, and as of June it had 1,000 digital TV customers.

Lavoy Knowles, CEO of McMinnville, Tenn.-based Ben Lomand Telephone Cooperative, said there were lots of moving parts for both IPTV providers and vendors on the roadway to IPTV deployments. While vendors have struggled with their own issues, the IPTV service provider is faced with integrating middleware with the billing system and set-top boxes while building out a headend.

“It’s a puzzle of what vendor works well with another,” Knowles said.

Knowles said the co-op started looking at deploying video services as a way to keep customers from migrating to satellite and cable providers, and the final cost of the headend was $2.2 million. With traditional phone revenues declining, Ben Lomand felt it had to offer a video bundle to its customers even though it will be several years before it breaks even on the initial investment.

The number of attendees at this year’s TelcoTV
show was 3,089 compared to 2,800 last year.

West Kentucky Rural Telephone CEO Trevor Bonstetter said his company is looking at a three-year period until it gains back the investment it has made in delivering video services. West Kentucky faces competition from five different cable operators in its footprint, so two years ago it started looking at a video business plan from The National Rural Telecommunications Cooperative (NRTC).

He said the hardest part of the company’s IPTV deployment was “recognizing we’re not a telephone company anymore.”

“The transition to IP is a big mindset,” he said. “We went through a year-and-a-half of IP training to understand what we were to become.”

AT&T primes new features for U-verse
While AT&T has certainly had its own struggles in getting its U-verse video service deployed, along with the fact that it recently announced it was scaling back on the number of homes that will be passed next year, the company obviously stands in stark contrast to the smaller telcos.

On the second day of the conference, Peter Hill, VP of converged services at AT&T Labs Research, provided a glimpse of what AT&T will be deploying over its fiber-to-the-curb service during the coming year, and also down the road.

“We’re past the point of last year where the question was: Will IPTV scale?,” said Hill, during the first keynote address Wednesday morning at TelcoTV. AT&T has 126,000 current video subscribers after starting the year with a mere 3,000.

“You can’t get to that number without significant flow through and automation,” Hill said. “We do have a competitive service and we can do it to scale.”

AT&T has whole-home DVRs on its radar for deployment for next year, which will allow set-top boxes in other rooms of a home to access video content that has been downloaded to a DVR set-top box. Like its cable and satellite competitors, Hill said AT&T will also add to its current stable of 30 HD channels next year.

“The encoding rates for H.264 have come down faster than we projected,” Hill said. “We’ll be able to do more channels in the same amount of bandwidth.”

Other new features for U-verse subscribers slated for next year include photo sharing via Microsoft middleware and a VoIP service.

Hill spent part of his presentation talking about prototype features that could, at some point, be added to the U-verse stable. One of those features is “Cinema Center” which allows movies to be purchased from Amazon with one click. The movie portal content would be dynamic and would allow subscribers to view trailers prior to making their purchases.

“We don’t have to create this stuff in IP because it reaches out to Web devices and incorporates them into IPTV,” Hill said.

Hill also demonstrated a feature that used an Apple i-Phone to remotely configure channel favorites on a home TV. The application would allow four different i-Phone users the ability to program their favorite shows on their own TVs in a household. The favorites feature allows subscribers to use their TVs as personalized devices, Hill said.

A Web cam feature would let viewers in different locations view a live performance of a sporting event or dance concert based on IP technology that uses switched digital video.

During the question-and-answer segment, Hill said AT&T would continue to rely on the Motorola set-top box with the Sigma Designs processor as its main workhorse, although it’s also working with Scientific Atlanta on a box with the same signature.

Hill expected new set-top boxes with second-generation chipsets from Sigma and Broadcom to be available in 2009.

While cable executives have said there is no compelling reason to move to an IP infrastructure to deliver video services, Hill contends that IPTV is “very different from cable and satellite” because the nature of IP allows for easier integration among services while also allowing it to take advantage of Internet partners such as Amazon.

IPTV not Necessary
Cox Communications senior vice president, video product development and support Steve Necessary was something of a surprise as a keynote speaker on the first day of TelcoTV in Atlanta, which is also where Cox is headquartered.

Necessary

Not surprisingly, Necessary said cable doesn’t need to move away from the investment it made in its HFC infrastructure to an IPTV play. IPTV is not a magic silver bullet but “a means of distributing video and it’s a Network Layer,” and not inclusive of other technologies such as MPEG-4, according to Necessary. Cable operators have used IP to send video back and forth between headends before IPTV became an industry buzzword.

Customers, Necessary said, don’t care about the technology that delivers their applications and services. Instead, they want more and better of what they have, including faster broadband speeds, more on-demand and more HD channels.

“They don’t care about technology and marketing; what matters are the applications,” he said, referring to customers. “They like reliability, quality, price and convenience; technology is secondary to most.”

To date, IPTV hasn’t been able to deliver a new product, with new revenue streams and new operational costs that are a vast improvement over what the current MPEG-2 over QAM infrastructure can do for cable, according to Necessary.

IPTV standards a work in progress
The first session at TelcoTV, called, “Telco TV Standards Roundtable: The Road to Seamless Services,” focused on how the industry can move standards and other initiatives forward while dealing with a complex roster of players who aren’t always on the same page.

While the cable industry has the SCTE to push through standards with ANSI, and CableLabs responding to the specification needs of the large operators, the IPTV space is more fragmented. As moderator Graham Finnie, who is a senior analyst with Heavy Reading, pointed out, “the number of stakeholders make it (IPTV) complex.”

As far as standards go, Dan O’Callaghan, chairman of the ATIS Interoperability Forum, said his group is working with ANSI on a standard definition of the IPTV architecture, as well as quality of experience (QoE) and quality of service (QoS). Once that’s completed, the second phase will cover technologies such as VOD, impulse pay-per-view, targeted ads and streaming content coming upstream from subscribers.

Scott Smyers, the president and chairman of DLNA, said more work needs to be done on digital rights management (DRM), as well as a process for products to be certified.

DSL Forum CEO Robin Mersh said the various entities on the panel, which also included a representative of the Consumer Electronics Association, need to do more work on gap analysis, and look at where the various standard or industry bodies overlap. While some of the gaps in standards are a result of IPTV’s proprietary environment, Ghassem Koleyni, the chairman of the ITU-T Focus Group on IPTV, said, “everything that exists needs to be an open standard.”

While video-over-IP has gone from a concept several years ago to a deployed service, the growing pains are far from over, especially when the various organizations are still hashing out the ground rules.

In just a few short years, IPTV has collected 8.3 million subscribers worldwide – more than 5 million of them in just the last 12 months. There are scores of smaller telephone companies with active video programs, and many large telcos outside the U.S. rolling out IP video.